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Nicaraguan Social Security Institute, Raise Retirment Age To 65 or We Can’t Pay

Posted about 6 years ago

Article Summary:

Government Officials want to double the number of contributions to the Nicaraguan Social Security Institute (INSS) retirement system and raise the retirement age from 60 to 65 years. The INSS says if the changes are not instituted the government will not be able to pay retirees in 2021.

Photo Credit: El Financierocr.com

Original Article Text From El Financierocr.com:

Nicaragua Pension Controversy

In order to avoid the announced bankruptcy of the Nicaraguan Social Security Institute (INSS), the Government launched a proposal raised by doubling the number of contributions from workers and raising the retirement age from 60 to 65 years.

The project raised a number of criticisms of specialists in the field and the rejection of labor. The document entitled “Proposal for Strengthening the Pension System INSS,” was published on the website of the institution and indicates that, if not implemented the changes, the INSS unable to pay pensions from 2021.
The proposal also states that the pension is calculated based on salary history of the retirees and not according to the salary of the last three years, as at present, which, according to some economists, representing a sharp decrease in pensions received by retirees.

Project will also increase in a short time the base of contributors at 22% going from 573,000 to 700,000. Under the proposal, the INSS currently has an endowment of $145,214.161, reflecting a nearly bankrupt institution, according to expert opinion on the matter and the government.

In an appearance on a television official, Roberto Lopez, president of the INSS, said that reform is not approved for Social Security by 2019 will have trouble paying pensions and the government will have to use taxes to meet .
Lopez said he would also seek to establish a system of proportional contribution, so that anyone with a higher salary, make a greater contribution to Social Security.

The doubling of contributions called it the “creation of a savings pillar,” which he claims is necessary for retirees to strengthen their pensions.

Lopez said that Nicaragua has a retiree for every five insured, but in 50 years there will be a pensioner for every two insured.
The reform had gradually increase the retirement age from 60 to 65 years, beginning to apply to those born in 1967. Retirement ages are adjusted for groups of 2 years, according to the proposal aims to begin in 2012.

Detrimental to workers
Economists and tax experts consider the proposal in more harm than good for workers and believe that only death is lengthening of the state institution.
Economist Adolfo Acevedo said that the reform raises a worker who happens to contribute 15 years of work in 30 years, while much of the public currently can not meet the minimum contributions.

Under the proposal, those who fail to meet the minimum contribution will receive a proportional pension, which for now does not exist, because the article that allowed a reduced pension, was repealed during the government of Violeta Barrios.

Acevedo also criticized the calculation will now be made to decide the amount of the pension, taking into account all the years working to get an average, whereas now we take into account the last three years, which are always the best income.
Israel Manuel Ruiz, an expert on social security reform is considered a blow to the insured and members of the system should demand a broad debate to allow a change to clarify and improve the law.

Speaking to El Nuevo Diario , the tax expert Julio Francisco Báez said the proposal to reform the pension system is “precarious and cruel.”
He said it is wrong to address the lack of financial strength for payment of pension reform is intended to only one of nine types of pensions for old age in Nicaragua.

Presidential adviser Bayardo Arce, tried to calm the backlash against the proposal, saying that this will begin to discuss in the second half of 2012.
The numbers of INSS

At the end of 2009, the INSS recorded a net worth of $145 million. $525 million owed by the State for late years by various entities.

In December 2008, there were 487,000 uninsured and 790,000 pensioners near retirement, disability, widowhood, orphan hood and descent.

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